NOVATO — Umpqua Holdings Corp. (Nasdaq: UMPQ), the parent company of Portland, Ore.-based Umpqua Bank, today announced a definitive agreement to acquire Novato-based Circle Bank and its parent company for $24.9 million.
Upon the completion of the acquisition, all six of Circle Bank’s branches will operate under the Umpqua name, joining Umpqua’s other branches in the North Bay. The transition is expected to be completed in the fourth quarter of 2012.
The acquisition includes a $20.4 million cash consideration for common shareholders, or $17.75 per share. Shoreline Capital Partners LP is the largest common shareholder of Circle Bank, with 99 percent of the outstanding shares of common stock of its parent company, Circle Bancorp. The total value also includes a $3.5 million cash redemption of preferred stock and the value of outstanding options and warrants.
The combined organization will have an asset value of about $11.8 billion, deposits of about $9.4 billion and shareholders’ equity of about $1.7 billion.
Umpqua initiated discussions of an acquisition, following the bank’s previously announced plan to seek growth opportunities in the Bay Area, said Kimberly Kaselionis, CEO of Circle Bank.
Circle Bank’s national profile had increased in recent years, following efforts for an initial public offering that began in late 2010.
“We had grown very rapidly, and we were at a place where we needed more capital to make the loans that the community needed,” said Kit Cole, chair and CEO of Circle Bancorp.
The company’s board of directors was quickly inundated with unsolicited offers from other banks, delaying the initial public offering but allowing the board to consider a variety of options, she said.
“We had the leisure of picking an organization that was the best fit. We didn’t just pick the highest bidder,” she said.
Ms. Cole noted that Umpqua agreed to acquire Circle Bancorp for a price-per-share that was nearly 60 percent higher than the $10.50-per-share pricing planned in Circle’s IPO.
A similarity in culture helped to influence the decision to approve the sale to Umpqua, Ms. Cole said. Umpqua had served as an early model in growing the Circle Bank brand over the past 16 years.
“We’re very much aligned,” said Ms. Kaselionis. “If there ever was a perfect strategic partnership, it is the one between Circle Bank and Umpqua.”
Circle Bank is the second-largest financial institution based in Marin County, after the $1.4 billion Bank of Marin. First Federal Savings & Loan Association is based in San Rafael, along with the Marin County Federal Credit Union.
Ray Davis, president and CEO of Umpqua Bank, said that he expects to grow the combined institution in the North Bay and beyond, implementing new offerings like international banking and wealth management.
While the precise staff and management structure of the new institution is still under development, Mr. Davis noted that there were approximately 170 open positions at Umpqua prior to the agreement with Circle Bank. Circle Bank currently has approximately 80 full-time-equivalent employees.
“To customers, the people that they know and see every day will still be there. But we will provide services that they’ve never had,” Mr. Davis said.
Umpqua will also go forward with the new Circle Bank headquarters undergoing construction at 999 Grant Ave. in Novato, which is expected for completion this fall. It will be among other high-profile locations that will soon open for the Umpqua, including a flagship branch in San Francisco’s Financial District and a branch in downtown San Jose.
“This is a great market,” said Mr. Davis, who has spent 18 years at Umpqua and helped it grow from a $100 million bank. “Our goal is to grow it. We’re going to put money to work.”
Ms. Cole led a group of investors in a $3 million recapitalization of the formerly named Novato Community Bank in 1996, initiating a change in control and putting into motion the efforts that would lead to the birth of Circle Bank in 2003.
Novato Community held $11 million in assets at the time, and was under scrutiny from the Federal Deposit Insurance Corp. after a 1992 cease-and-desist order that cited concerns such as inadequate capital and management, Ms. Cole said.
Seeing an opportunity, Ms. Cole, Ms. Kaselionis and others began to rebuild the bank. The cease and desist order was terminated in 1998, and the brand was re-launched as Circle Bank in 2003.
“Over the years, the staff has built that into a pristine $300 million institution, with no additional capital,” Ms. Cole said. “We created 70 new jobs. Now, we’ll probably create even more jobs.”
Ms. Cole and Miss Kaselionis together founded two other North Bay institutions: New Horizon Savings in 1981, and Tamalpais Bank in 1991. Luther Burbank Savings acquired New Horizon ten years later. Tamalpais Bank was closed by regulators in 2010, three years after the departure of Ms. Cole as chair and 14 years after Ms. Kaselionis was named as CEO of the institution that would become Circle Bank.
Umpqua Bank has assets exceeding $11.5 billion, with a branch in Santa Rosa and several branches in Napa County. The company has approximately 2,300 employees.
Ms. Kaselionis said that she will continue to lead Circle Bank through the transition.
“One of the benefits for us during this merger is that they are continuing to grow,” she said. “It really is a day of celebration.”
Circle Bancorp reported net assets of $306 million as of June 30, 2012. With headquarters in Novato, the bank operates branches in Corte Madera, San Rafael, Petaluma, Santa Rosa and San Francisco’s Noe Valley.
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